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House Dems eye alcohol tax bump

A tax increase on alcohol has been added to the list of ways Minnesota House Democrats are proposing to help balance the state's budget and spend more money for schools.

The plan announced by DFL House leaders also includes an income tax hike on top earners, a cigarette tax increase and higher taxes on corporations that operate overseas.

Monday's announcement is the first indication from the DFL that they are also targeting alcohol.
DFL House Speaker Paul Thissen said they want to raise alcohol and cigarette taxes because it would help offset problems caused by drinking and smoking.

"The reason we're going there is that we believe that the costs associated with tobacco and alcohol hit the state budget hard, and this is a way to address those issues," Thissen said.

“This proposal is a new chapter in DFL reality TV called “Taxes Gone Wild.”

Rep. Greg Davids, R-Preston

The excise tax increase would vary based on the type of alcohol purchased. Spirits would see a $1.58 per bottle increase. Wine would be taxed an additional 47 cents a bottle. The tax on a 12-pack of beer would be 84 cents higher. Supporters of the higher tax on alcohol say it hasn't gone up for nearly 30 years.

The DFL plan would increase liquor taxes by 50 percent, according to the Minnesota Licensed Beverage Association, which represents alcohol retailers. The group's lobbyist Joe Bagnoli said the 2,200 members, who own bars and liquor stores, won't be able to afford the tax hike.

"This is a regressive tax that is being applied to them at a time where they can least afford to absorb it," Bagnoli said. "There have been increases in shipping, in food costs, in property taxes and this is perhaps the most regressive way you can apply the tax and pass it on."

The House DFL tax bill raises a total of $2.6 billion over the next two years.

It would create a new, permanent fourth-tier income tax rate of 8.49 percent on couples with an annual taxable income of $400,000 or more.

There is also a temporary income tax surcharge on couples with an annual taxable income of $500,000 or more that will go to paying back a K-12 school shift that was used to balance the budget in past years. That surcharge would end once the shift is paid back. The plan would also increase the tobacco tax by $1.60 per pack.

Speaker of the House Paul ThissenMPR Photo/Jeffrey Thompson

The plan also provides property tax relief for 520,000 homeowners, increases the tax break for renters and gives manufacturers a sales tax break for capital equipment purchases. It also helps pay for improvements in Rochester to handle a proposed Mayo Clinic expansion, for a Mall of America expansion and a tax break for 3M.

Republican Rep. Greg Davids of Preston was quick to criticize the DFL plan, saying "This proposal is a new chapter in DFL reality-TV called "Taxes Gone Wild." That's what we have here. If this is a balanced approach, I would hate to see an unbalanced approach."

The new money is needed to end the state's budget roller coaster and spend more on education, DFL House Majority Leader Erin Murphy said.

"The revenue in the tax bill allows us to balance our deficit; it allows us to pay back our schools and it allows us to invest in our future," Murphy said. "An important future for everybody in Minnesota."

The plan still has to be reconciled with Senate Democrats and Gov. Mark Dayton, who has said he does not support a tax on alcohol or the temporary income tax surcharge. The governor's plan includes a higher, permanent income tax rate on a larger number of Minnesotans. His tobacco tax is 66 cents per pack lower than House Democrats.

Senate Democrats have yet to release their full tax bill, but a subcommittee report released last week includes expanding sales tax to include clothing and a host of consumer services while lowering the overall tax rate. Senate DFL leaders have also said their plan will include higher tobacco taxes and income taxes on top earners. They are expected to release their plan next week.